How to evaluate real estate deals like a sponsor

When introducing to a real estate company, the investor should first establish the company’s experience level and track record. Reputable companies can serve extensive portfolios with past investments of detailed financial results and operating histories. Does the company have enough real estate experience? Does the company have attractive sources of investments? What are the company’s experience in real negotiations, financial/legal strategies?

The sponsor is the most important component when it comes to real estate syndications. If you are planning to partner with a sponsor there are certain important decisions and analysis that needs to be taken into consideration as discussed below:

How to evaluate real estate deals like a sponsor:

  1. Check the track record:

While checking the sponsors’ track record understand what drove the success and determine if these factors can be replicated in future deals. Understand the challenges they faced in the previous deals and how did they overcome them. Sometimes the sponsors won’t have enough experience but are stronger in the market. There are many aspects such as project management, budget management, vendor relations, and investor relations.

  1. Look for an all-star team:

The operator is the key person and has the ability to assemble a remarkable team and oversee the business plan. Besides the operator, the other vital aspects that need to be considered is about the property management company, lender, contractor, and advisors.

  1. Asses their knowledge and resources:

A sponsor should have a strong knowledge of their market, deal structure, risks, financing, and many other factors that impact operations. For instance, you will have to asses the operators’ knowledge and resourcefulness. What do they love about the deal, How do they plan to mitigate those risks? Have they navigated issues of property managers, contractors, tenants, and even local governments? All these factors need to be known to understand the operators’ knowledge and resourcefulness.

  1. Determine trustworthiness:

The last step is to look into the trustworthiness. What’s their longterm plan? Are they transparent? Are they prioritizing investors’ returns over their own profits? A sponsor should be able to answer these questions and build trust among the investors.

Bottom line

Choosing a sponsor and evaluating is a critical step for any investor. The sponsor should have extensive track record of success with great knowledge and resourcefulness. He should be someone who is trustworthy. Once you have decided on the sponsor then you can move forward to the market and the actual deal.

There are many more areas that need to evaluate for a real estate property. At RealtySlice we take the most crucial measure – the performance, the background check, track record, and more. Credit checks can separately notify us not only of the sponsors’ past history but also past issues with financial institutions. At RealtySlice we try to work with established and reputable operators so that we can provide deal flow to our investors.

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